Buying commercial property: what to check

The short answer

A commercial unit is only worth its price if it can be used, let and resold for commercial purposes without a fight with the authority. That depends far more on papers than on the fit-out you see at the site visit.

Work through seven questions in order: does the seller own it cleanly; does the land use allow commercial activity; was the building approved for that use; is it certified complete and fit to occupy; does it hold the safety approvals its size needs; what does it cost to hold each month; and is there a tenant whose lease you are buying with it. Tax (GST, TDS and stamp duty) comes last, but it changes the cheque you write.

Step 1: title and ownership

1. Read the chain of sale deeds back to the original allotment or conveyance, and check that each transfer was registered. A break in the chain is a lawyer's question, not a negotiating point.

2. Ask the sub-registrar's office for an encumbrance certificate for the longest period the office will give. It lists registered loans and charges against the unit.

3. If the seller is a company or a firm, ask for the board resolution or partners' authority that permits this sale and names who signs.

4. If the unit is mortgaged, agree in writing how the loan will be closed and the original deeds released at registration. Pay the bank directly against a closure letter where that is the arrangement.

5. Where the building stands on land allotted by a development authority or an industrial corporation, check whether its permission is needed before the transfer and whether a transfer fee is payable.

Step 2: land use and building approvals

Land use (zoning) is set by the city's master plan or development plan. A shop or office on land zoned residential can be sealed or charged conversion fees however long it has traded. Ask for the zoning, and where the land was converted, the conversion order.

The building plan sanction from the municipal or development authority shows what was allowed to be built and for what use. Compare it with what stands: an extra floor, a basement used as a shop or a mezzanine that was not approved are your problem after you buy.

In a mixed-use building, check that your specific unit is shown for commercial use in the approved plan, not just that the building has some commercial floors.

Step 3: completion, occupancy and fire approval

The completion certificate confirms the building was constructed to the approved plan; the occupancy certificate says it is fit to be occupied. Without them, utility connections, loans and resale all get harder, and a tenant's own lenders or auditors may refuse the premises.

Buildings above the height, area or occupancy limits set by the state's fire rules need a fire no-objection certificate, and many need it renewed periodically. Ask for the current one and check that it covers the floor and the use you intend. A restaurant or a training centre may need more than the building was approved for.

Ask for lift licences and the structural stability certificate where the city requires them for older buildings.

Step 4: the monthly cost of holding it

Property tax: municipalities tax commercial property at a different rate or category from residential. Ask for the last few receipts in the seller's name and check that the category on the bill is commercial; arrears transfer with the property.

Common area maintenance (CAM): offices and malls usually charge maintenance per square foot of chargeable area each month, covering lifts, security, housekeeping and common power. Ask for the last year's bills, the current rate, any sinking fund and whether a revision is pending.

Power: check the sanctioned load and that the connection is on a commercial tariff. Raising sanctioned load later takes time and money.

Parking: find out whether bays are allotted to the unit in writing or only used by custom.

Illustrative example (not market data): a 1,000 sq ft chargeable office with CAM of ₹20 per sq ft a month costs ₹20,000 a month in CAM alone, or ₹2,40,000 a year, before property tax, insurance and electricity — and it is payable whether or not the unit is let.

Step 5: is it pre-leased?

If a tenant is in occupation, you are buying the lease as well as the walls. Read the full lease (not a summary): the tenant entity, rent, escalation, remaining term, lock-in, security deposit, who pays CAM and property tax, and the tenant's exit rights.

The security deposit belongs to the tenant. The sale deed should record that it is passed to you, or that the price is reduced by it, because you will owe it back at the end of the lease.

Ask for the last twelve months' rent receipts or bank credits and any default or dispute notices. Our separate guide covers how to evaluate a pre-leased unit in detail.

Step 6: GST, TDS and stamp duty

GST: GST applies to an under-construction unit sold before the completion certificate is issued. A completed unit sold after the completion certificate, or a resale, carries no GST on the price. For an under-construction unit, ask the builder to show the GST rate and amount on the demand letter and invoice before you pay.

TDS: the buyer must deduct 1% of the price as tax at source when the consideration for the property is ₹50 lakh or more (section 194-IA of the Income-tax Act, 1961, for transactions before 1 April 2026). The Income-tax Act, 2025 has applied from 1 April 2026 with renumbered sections; check the current section and form on the income tax portal before you pay. For a seller who is not resident in India, different rules apply and you need professional advice.

Stamp duty and registration: charged by the state on the higher of the price and the state's official value. Some states give concessions only on residential property — the Maharashtra row on our stamp duty page, for example, notes that the woman buyer's concession applies to residential property — so do not assume a concession applies to a shop or office.

Illustrative example (round numbers, not a quote): on a completed office bought for ₹80,00,000 in a state charging 6% stamp duty and 1% registration, the buyer deducts TDS of ₹80,000 (1%) and pays it to the government against the seller's PAN, so the seller receives ₹79,20,000; the buyer separately pays ₹4,80,000 stamp duty and ₹80,000 registration (where the fee is uncapped). No GST is charged because the building already has its completion certificate.

Documents to collect

Chain of title deeds and the original allotment or conveyance; encumbrance certificate; approved building plan and any revised sanction; completion and occupancy certificates; fire NOC where required; zoning or conversion order; latest property tax receipts; maintenance agency no-dues letter and CAM agreement; electricity bill showing sanctioned load and tariff; the lease, rent receipts and tenant correspondence if pre-leased; the seller's PAN; RERA registration number if the project is still under construction.

Common mistakes, and questions to ask the seller

Mistakes: buying on the strength of an existing tenant without reading the lease; assuming a unit in a commercial-looking building is approved for your use; ignoring CAM and property tax in the return you expect; forgetting the tenant's deposit when agreeing the price; paying a builder GST on a unit that already has its completion certificate without asking why.

Questions to ask: Is this unit shown as commercial in the approved plan? When were the completion and occupancy certificates issued? Is there a current fire NOC for this floor? What were last year's CAM and property tax bills? Are any dues or disputes pending with the maintenance agency? Is the unit mortgaged? If let, can I see the full lease and twelve months of rent credits?

This is general information, not tax or legal advice; confirm how it applies to you with a chartered accountant (and a lawyer for the documents) before you sign or pay.

Common questions

Sources

• GST on under-construction property: Notification 03/2019-Central Tax (Rate), as used on our total cost of buying calculator; checked 2 October 2026
• TDS on purchase: section 194-IA of the Income-tax Act, 1961 (transactions before 1 April 2026); Income-tax Act, 2025 in force from 1 April 2026 with renumbered sections; checked 2 October 2026
• Stamp duty and registration: each state's registration department, as recorded on our stamp duty pages (last checked 23 September 2026)
• Building plan sanction, completion/occupancy certificates and fire NOC: the municipal or development authority and the state fire service rules that apply to the building

Last checked 2026-10-02.